THE developing countries despite receiving foreign aid packages for poverty alleviation continue to witness a sizable number of their population slipping down the poverty line. This can be attributed to a faulty mode of aid delivery and poor governance in aid receiving countries.

Pakistan is also being extended multipurpose aid packages to arrest its growing poverty but now donors assume that delivering aid at the government level has proved wrong. It is a common phenomenon that top-down delivery mode generally results in waste of resources due to irrational plans and often siphoning off of funds by those managing it. Poverty alleviation funds are not put to the good use.

Apart from providing various social safety nets to the poor, the aid is meant for disbursing micro loans through formal sector including microfinance banks. But these funds either do not reach down the line to poorest of the poor or where provided through formal micro financing institutions / banks, the automatic up-gradation of these small or medium size businesses was never envisioned due to low maximum financing limit prescribed for micro loans.

The lack of government commitment to provide support services like required infrastructure and market outlets at initial stage of business is also responsible for keeping small business owners at brink of poverty.

M/s Hubbard & Duggan in their co-authored book, `The Aid Trap` suggest that aid-giving agencies need to extend financial assistance to developing countries on the pattern of Marshall Plan launched after the World War II which binds aid-receiving countries to reform their business suppressing policies; so as to boost economic growth rate. This necessitates payment of loans to local government for reinvestment in infrastructure and support services.

But as a practice, aid to developing countries generally goes under top down programme, which again due to bureaucratic hiccups at different tiers of government and delivery mechanism at end- user level, deprives deserving poor and small businesses of the financial assistance. Presently, bottom up formula is being applied in case of certain low income countries including Pakistan where aid-giving agencies focus on market driven businesses, ignoring the socio- economic environment at grass root level.

In case of foreign investment in micro finance institutions, ignorance of foreign investors` about the country`s socio-economic and cultural environment often results in failure to adapt to the system effectively, impacting adversely efforts to eradicate poverty.

On the other hand, micro finance institutions (MFIs) and micro finance banks (MFBs) have to compromise with the vision of foreign investing agencies, which is not in conformity with their objectives ofempowerment of the masses. The compromise with foreign investors on the choices of areas/sectors to be financed is not helping boosting up economic activity.

For developing countries, effective strategy to eradicate poverty is the self-reliance approach instead of eyeing foreign aid programmes. Micro businesses and SME sector need to be promoted with the help of indigenous capital and foreign investments accepted with firm stipulation about the exit of foreign stake at certain point of time, particularly when indigenous equity itself has accumulated at a desired level. Further, transfer of earnings back to investor`s country should be allowed on the condition that 50 per cent of the earnings are to be ploughed back into the business.

Foreign assistance/aid can however be sought for strengthening social sector with effective system in place for delivery of funds to institutions ensuring education and healthcare facilities to the poor.

The private sector should take it as its social responsibility to empower unemployed workforce by providing employment and self-employment opportunities. This should be done with a holistic approach. Well established entrepreneurs, both in urban and rural sectors, must feel their moral obligation to give back a part of their wealth for the benefit of economically disadvantaged population by way of investment for developing infrastructure, facilitating establishment of small and micro businesses and farms.

Building of small dams, solar-based power projects, warehouses and providing storage facilities and market outlets etc are some of the services they can render as their social responsibility for eradication of extreme poverty. In the recent past, an example was set up by construction contractors who took part in constructing flyovers and under-passes in Karachi and voluntarily came forward to reconstruct fire- ravaged buildings and shops free of cost during last year`s sectarian riots on the occasion of Muharam in the surroundings of Bolton Market Karachi. They took it as their moral obligation to rehabilitate small business owners who all of a sudden had fallen prey to extreme poverty due to total damage of their movable and immovable property during the riots.